For several weeks I have been expecting a major secular bottom in precious metals and the junior miner. I told you to watch for the accumulation after a shakeout. See the full article from several weeks ago by clicking on the following link.
The junior gold miners (GDXJ) appear to be on the verge of breaking a three month downtrend. There have been some strong days of accumulation in November. A break above the 50 day moving average at $31 would confirm the painful correction is over.
Gold broke below $1180 which triggered a lot of stop losses and margin calls. The weak hands were shaken out and it appears there was large accumulation as volume was high. Now gold appears to be reversing higher breaking above the critical $1200 mark. Look for gold to break above the 50 day at $1208 to confirm a potential shakeout.
For about the two past months, we have witnessed panic selling in precious metals and junior miners the capitulation. However, on November 7th and 14th we saw major accumulation in gold futures on high volume. This may signal the beginning of a major short covering combined with value buying or the accumulation after the capitulation.
Silver has seen a nice bounce off $15 with some accumulation. Look to see if silver can break recent five month downtrend at $16.50 and hit over 50 on the RSI.
Some of our junior miners including what I believe are the top three discoveries in Nevada were affected by the panic sell off which I said may be a bargain buying opportunity. Despite making new high grade discoveries these stocks were trading for at least 50% off. Smart money continues to accumulate while the weak hands panic.
How does one find the mining stocks that outperform? One of the best ways is follow the majors with top technical teams. Look to see what they are investing in and try to buy it at a discount to what they payed for it. If you see a NYSE producer taking equity positions in a small cap junior than that may be a takeout target in the next upswing. Stay tuned to my free newsletter where I highlight the juniors attracting major capital. Remember M&A is increasing and this may be one of the best times to start investing in this sector at historic lows.
